Dependant Tax Deduction, IRS 8332, Arrearage

[mcnamajp]

I was divorced in 1998 in Connecticut. The divorce decree stipulated that I claim my son and my ex-wife (custodial parent) claim my daughter on our taxes. The conditional statement was added "...provided Husband has made all child support payments as ordered by the court for the tax year in question" and we would exchange forms 8332 to accomplish the allocation for tax purposes.
In 2004 I fell behind on my child support due to going on disability. I met with child support services, an agreement was made in court to pay by garnishment the amount currently due for support going forward and an additional payment to go to the arrearage. I thought this put me in good standing and I never missed any payments from then through the present.
Recently a judge gave all of the tax deductions for my son to my ex-wife for 2004, 2005, 2006 and 2007 not because I didn't make the "current" support payments (I did) but because there was still an arrearage existing from 2004 for those years. Is this interpretation correct? This baffled me because the current year tax deduction contingency was "provided Husband has made all child support payments as ordered by the court for the tax year in question". This decision results in the loss of several thousand dollars in tax deductions - my loss her gain- plus I have repaid the original $4500. It seems strange to me that the arrearage from 2004 for which monthly payments were being made would cause me to lose future years of the tax deduction for my son on my taxes. If this is correct or incorrect can anyone direct me to CT statutes that cover this? I believe my only recourse at this point would be an appeal since this was the result of (her) motion to reargue.
The day this decision was reached court was chaotic, the judge was imposing time limitations and she reached her decision quickly - made me feel there had to be precedence or was this just a subjective decision. Should I go forward with an appeal?

[mistoffolees]

None of that is correct. The IRS will not honor contingent agreements on deductibility. Either you get the deduction or your ex does, as far as the IRS is concerned. They don't want to be in the rule of arbitrators. The judge can not overrule the IRS.

The way it is determined is:

1. Who gets the deduction per IRS rules. Typically, that would be the person who had the child the most nights out of the year. In the case of equal number of nights, there are tie breakers. If the number of nights are equal, the person with the higher AGI gets the deduction. If the AGI is the same, it goes to the next tie-breaker, but I doubt if that happens often (if at all).

2. The court can order that one person get the deduction ON A NON-CONTINGENT BASIS. That is, they can say you always get it or your ex gets it or it alternates. If the court rules this way, it will overrule #1 above. Depending on the circumstances (including how old the decree is), the court might have to order one party to sign an 8332 form.

3. If ordered by the court OR if one of you voluntarily chooses to do it, then you can sign an 8332 which gives up your right to claim a deduction. This will overrule either of the above determinations.

So:
- if you have a valid 8332 signed by your ex, you get the deduction. If you signed an 8332, your ex gets the deduction.
- If there's no 8332 form and the court specifically orders the deduction to one party, that party gets the deduction (although you might still need the 8332 to make the IRS happy).
- If there is a contingent order of the deduction, it's worthless as far as the IRS is concerned. You COULD go back and ask for clarification.
- If there's no court order and no 8332, then IRS rules apply.

[Bali Hai]

Originally Posted by mcnamajp

I was divorced in 1998 in Connecticut. The divorce decree stipulated that I claim my son and my ex-wife (custodial parent) claim my daughter on our taxes. The conditional statement was added "...provided Husband has made all child support payments as ordered by the court for the tax year in question" and we would exchange forms 8332 to accomplish the allocation for tax purposes.
In 2004 I fell behind on my child support due to going on disability. I met with child support services, an agreement was made in court to pay by garnishment the amount currently due for support going forward and an additional payment to go to the arrearage. I thought this put me in good standing and I never missed any payments from then through the present.
Recently a judge gave all of the tax deductions for my son to my ex-wife for 2004, 2005, 2006 and 2007 not because I didn't make the "current" support payments (I did) but because there was still an arrearage existing from 2004 for those years. Is this interpretation correct? This baffled me because the current year tax deduction contingency was "provided Husband has made all child support payments as ordered by the court for the tax year in question". This decision results in the loss of several thousand dollars in tax deductions - my loss her gain- plus I have repaid the original $4500. It seems strange to me that the arrearage from 2004 for which monthly payments were being made would cause me to lose future years of the tax deduction for my son on my taxes. If this is correct or incorrect can anyone direct me to CT statutes that cover this? I believe my only recourse at this point would be an appeal since this was the result of (her) motion to reargue.
The day this decision was reached court was chaotic, the judge was imposing time limitations and she reached her decision quickly - made me feel there had to be precedence or was this just a subjective decision. Should I go forward with an appeal?

Unless there is further language that penalizes you for future years do to the arrearage in 2004, my guess is that the judge sucked this decsion out of her thumb and decided to give you more justice than what the original order stated.

It could be that she just didn't like your looks.

[LdiJ]

Originally Posted by Bali Hai

Unless there is further language that penalizes you for future years do to the arrearage in 2004, my guess is that the judge sucked this decsion out of her thumb and decided to give you more justice than what the original order stated.

It could be that she just didn't like your looks.

Bali...this is one instance where the judge probably handled it properly.

Technically a state court judge cannot allocate the tax exemption for a child. Federal tax regs supercede state law and in this instance, the tax exemption belongs to the custodial parent as defined by the tax regs.

A state court judge can get around that by ordering the CP to sign a form 8332 releasing the exemption to the NCP, but its a bit difficult to justify that if the NCP has arrearages...even if those arrearages are for a previous year.

Also everyone should be aware that the IRS will no longer accept court orders at all...now a form 8332 is required in all instances...new regs allow a form 8332 that was signed for future years, to be revoked by the CP.

Also, everyone should also be aware that the long term intention by the IRS is to eliminate form 8332 entirely, and for state courts to be required to take the tax exemptions into consideration in the child support calculation, which, quite frankly, makes total sense and will save the taxpayers tons of money.

[mcnamajp]

I thought the judge would enforce what the agreement was in the divorce decree. Is an arrearage considered current tax year support if from a prior year? The conditional statement added : "...provided Husband has made all child support payments as ordered by the court for the tax year in question" and my ex and I were ordered by the divorce decree to exchange forms 8332 to accomplish the allocation for tax purposes. My ex never provided any 8332 for any of the 11 years probably because she enjoyed the sport of not giving it to me whenever I asked for it. For the first 8 years she claimed my daugter and I claimed my son on our tax returns as agreed in the divorce decree. I paid all support on time except for the arrearage in 2004 and was never held in contempt for non-payment. Since a $4500 arrearage has cost me several thousand in lost tax deductions and the arrearage has also since been paid - a $4500 arrearage in effect cost me three times that amount.
Is it correct to consider a past years arrearage as current year "ordered support"? I'd like to know if the judge was correct in doing this? To me "child support payments as ordered by the court for the tax year in question" is the total of the stipulated weekly rate of payments for the current year - not for the past arrearage or since I had a negotiated extra payment toward the arrearage I could understand if that "extra" amount would be included as well. I would also point out that there is no date/deadline specified by which the support for a tax year has to be paid. Hypothetically as long as it IS paid wouldn't I have earned the deduction?

[mcnamajp]

I thought the judge would enforce what the agreement was in the divorce decree. Is an arrearage considered current tax year support if from a prior year? The conditional statement stated I was entitled to the deduction : "...provided Husband has made all child support payments as ordered by the court for the tax year in question" and my ex and I were ordered by the divorce decree to exchange forms 8332 to accomplish the allocation for tax purposes. My ex never provided any 8332 for any of the 11 years probably because she enjoyed the sport of not giving it to me whenever I asked for it. For the first 8 years she claimed my daugter and I claimed my son on our tax returns as agreed in the divorce decree. I paid all support on time except for the arrearage in 2004 and was never held in contempt for non-payment. Since a $4500 arrearage has cost me several thousand in lost tax deductions and the arrearage has also since been paid - a $4500 arrearage in effect cost me three times that amount.
Is it correct to consider a past years arrearage as current year "ordered support"? I'd like to know if the judge was correct in doing this? To me "child support payments as ordered by the court for the tax year in question" is the total of the stipulated weekly rate of payments for the current year - not for the past arrearage or since I had a negotiated extra payment toward the arrearage I could understand if that "extra" amount would be included as well. I would also point out that there is no date/deadline specified by which the support for a tax year has to be paid. Hypothetically as long as it IS paid wouldn't I have earned the deduction?

[Bali Hai]

Originally Posted by LdiJ

Bali...this is one instance where the judge probably handled it properly.

Technically a state court judge cannot allocate the tax exemption for a child. Federal tax regs supercede state law and in this instance, the tax exemption belongs to the custodial parent as defined by the tax regs.

Well, why was this done by the idiot judge to begin with then?

Everybody is taught to obey the court because the all knowing judge has the wisdom and power.

Now you're telling me that the jackass judge's don't know what they are doing?

Which is it?? Let OP know ASAP, Ok LD?

A state court judge can get around that by ordering the CP to sign a form 8332 releasing the exemption to the NCP, but its a bit difficult to justify that if the NCP has arrearages...even if those arrearages are for a previous year.

Well that is NOT what the original order stated. The original order stated he gets the exemption as long as his payments are current for that tax year.

Also everyone should be aware that the IRS will no longer accept court orders at all...now a form 8332 is required in all instances...new regs allow a form 8332 that was signed for future years, to be revoked by the CP.

I don't accept court orders at all either but have to suck up and do what they tell me to do, what good is the court then?

Also, everyone should also be aware that the long term intention by the IRS is to eliminate form 8332 entirely, and for state courts to be required to take the tax exemptions into consideration in the child support calculation, which, quite frankly, makes total sense and will save the taxpayers tons of money.

The child support calculation is federal and state mandated. Wouldn't it be better that someone other than every math challanged judge do the calculation?

[LdiJ]

Originally Posted by Bali Hai

The child support calculation is federal and state mandated. Wouldn't it be better that someone other than every math challanged judge do the calculation?

Bali, its one area of law where traditionally state court judges have made rulings that are not technically enforceable under federal law. However, because its possible for a form 8332 to be signed, its possible for a judge to order someone to sign one. Once form 8332 is eliminated then states will have to re-figure their child support calculations to take the tax exemption for children into consideration when setting child support.

In most states the judge doesn't calculate anything, most states have computerized child support calculators available for the use of the judge.

[Bali Hai]

Originally Posted by LdiJ

Bali, its one area of law where traditionally state court judges have made rulings that are not technically enforceable under federal law. However, because its possible for a form 8332 to be signed, its possible for a judge to order someone to sign one. Once form 8332 is eliminated then states will have to re-figure their child support calculations to take the tax exemption for children into consideration when setting child support.

In most states the judge doesn't calculate anything, most states have computerized child support calculators available for the use of the judge.

Also, everyone should also be aware that the long term intention by the IRS is to eliminate form 8332 entirely, and for state courts to be required to take the tax exemptions into consideration in the child support calculation, which, quite frankly, makes total sense and will save the taxpayers tons of money.

Pardon me for taking your previous post literally.

[LdiJ]

Originally Posted by Bali Hai

Also, everyone should also be aware that the long term intention by the IRS is to eliminate form 8332 entirely, and for state courts to be required to take the tax exemptions into consideration in the child support calculation, which, quite frankly, makes total sense and will save the taxpayers tons of money.

Pardon me for taking your previous post literally.

Ok, now I am totally confused. Were you asking a different question than the one I thought you were?

However I should clarify that statement anyway. I really should have said:

If the state courts still want non-custodial parents to get a benefit from a tax exemption, then the state court will have to take the tax exemption into consideration in the child support calculation.

Perhaps that answers whatever question you had that I didn't answer.

[Bali Hai]

Originally Posted by LdiJ

Ok, now I am totally confused. Were you asking a different question than the one I thought you were?

However I should clarify that statement anyway. I really should have said:

If the state courts still want non-custodial parents to get a benefit from a tax exemption, then the state court will have to take the tax exemption into consideration in the child support calculation.

Perhaps that answers whatever question you had that I didn't answer.

And I am under the impression that the state court will need to do some math in taking into consideration the tax exemption for the child support calculation?

From personal experience we don't want lawyers or judges doing math because I haven't seen any of them get it right yet.

[mistoffolees]

Originally Posted by Bali Hai

And I am under the impression that the state court will need to do some math in taking into consideration the tax exemption for the child support calculation?

From personal experience we don't want lawyers or judges doing math because I haven't seen any of them get it right yet.

It's not the math that's a problem. It's the assumptions that go into it. You have to make assumptions about current tax rates and, if the money is going to be left until retirement, future tax rates. That's why it's not, in general, a good idea to trade off pre-tax and after-tax moneys. It has nothing to do with whether judges can do math or not.

[LdiJ]

Originally Posted by Bali Hai

And I am under the impression that the state court will need to do some math in taking into consideration the tax exemption for the child support calculation?

From personal experience we don't want lawyers or judges doing math because I haven't seen any of them get it right yet.

Ok..my answer to that is that most of them don't do the actual math. They have a computer that does the math for them.